How Management Consultants Can Help CEOs Implement Organizational Change?

Strategy is as a pattern of decisions and plans, which are directed at interacting with the external and internal environment and effectively and efficiently allocating capabilities to achieve organizational objectives and increase profitability. So, organizational strategies are formed to efficiently deploy capabilities and interact with environments– both internal and external. Many companies have plans going well into the future. Long term goals spanning five to fifteen years. While short-term goals are more tactical and are just as important. Competitive advantage is sought by many companies, for instance, Grant, concentrates on knowledge creation and application, and argues that firms are entities that must create and apply knowledge in order to enhance competitive advantage. An example of this is when Jamie Diamond left Citigroup to head up J.P. Morgan in the 2013, he was paid 20 million dollars to not take any people with him to J. P. Morgan for three years. Thus, knowledge creation and application manifest themselves in people, organizations, systems, and processes and should be guarded like gold in the Federal Reserve Bank.

Consultants can see organizational strategy as a sum of objectives, plans, and procedures designed to efficiently and effectively upgrade organizational capabilities and interact with their environment more effectively. In particular, strategy defines a pattern to deploy organizational capabilities and interact with both the internal and the external environment. Consultants can help CEOs manage their knowledge assets to create new ideas and knowledge aimed at achieving organizational objectives. First and foremost, just as one organization is holding knowledge back from competitors they are following suit. Knowledge could be the most important component of success in this ever changing technological environment of today. Thus, organizational strategy is an internal resource affecting knowledge and in most cases, knowledge is the most strategic factor of competitive advantage.

Consultants can help CEOs find the best analysis strategy using a problematic search of various options. Analysis strategy stimulates organizations to apply information systems in their decision-making processes to investigate various alternatives and options.  This strategy can promote the knowledge utilization by providing a series of clear guidelines for companies to track future trends in the business environment, and accordingly conduct “what-if” analysis and allocate organizational resources. Herein, consultants can analyze strategic milestones to meet the goals of the employee intellectual stimulation and personal development. Analysis strategy is highly related to firms’ capacity to generate new ideas and knowledge, and can potentially provide new and more innovative solutions for organizational problems as they arise.

In addition, consultants can help CEOs develop an effective strategy to implement a series of basic research aimed at developing a more comprehensive vision for the future by incorporating upcoming trends in the business environment. CEOs can expand the growth opportunities available to organizations that may be challenging but important to close the gap between success and failure. Consultants can provide consulting services to develop relationships and interactions in order to provide valuable resources for the company as a whole. Furthermore, consultants can help CEOs take an effective offensive approach at times and in this case they should employ a defensive strategy. Some CEOs feel that a defensive strategy, while necessary, sets a negative connotation on their span of control. However, a defensive strategy utilizes modifications in order to efficiently use available resources, decrease costs, and control operational risk. CEOs must also take a proactive approach to search for better positions in the business environment. In this case, consultants can help CEOs build communities of practice within companies, thereby inspiring employees to find better opportunities and solutions to problems. Furthermore, consultants can help CEOs set highly desired expectations and provide a suitable situation for employees to identify new opportunities. The tendency to search for workplace issues and their root causes can potentially generate better alternatives to solve them. 

Consultants can also help CEOs reshape organizational structure to be more effective when the command center of organizations can disseminate information in a decentralized and organic way as opposed to the mechanical and centralized command center. Decentralized structures shift the power of decision-making to the lower levels and subsequently inspire employees to create new ideas and even implement them while centralized structures may negatively impact interdepartmental communications and inhibit knowledge exchange. Recent research in this area  affirms that the there is a negative impact of centralization on various knowledge management processes such as knowledge acquiring, creating, and sharing among both managers and departmental units. Ergo, consultants play a critical role in building more effective structures within organizations. 

In addition, consultants can provide consulting services to drive an effective culture to inspire employees to create new ideas and acquire knowledge from various sources such as customers. This step can be essential to identify the needs of customers and also recognize the emerging changes in the business environment. Consultants can, therefore, create the most appropriate workplaces to facilitate innovation and to motivate employees to solve their current problems in a more innovative manner. CEOs steering the organizational culture facilitate innovation, by undertaking initiatives that improve knowledge transfer, thus enhancing the performance of employees and the implementation of effective changes to maintain the quality of products and services. This can also exploit organizational performance, though improving the quality of products and services, and the organizational revenue. Furthermore, consultants can help CEOs develop a learning culture in which people continuously grow and develop both personally and professionally. This is similar to a value-chain approach. Consultants also need to first support this approach because they play a strategic role in building effective learning organizations through applying incentives as mechanisms to develop a more innovative climate and managing effective tools to acquire knowledge from external sources. 

Author Biography

Mostafa Sayyadi, CAHRI, AFAIM, CPMgr, works with senior business leaders to effectively develop innovation in companies, and helps companies—from start-ups to the Fortune 100—succeed by improving the effectiveness of their leaders. He is a business book author and a long-time contributor to HR.com and Consulting Magazine and his work has been featured in these top-flight business publications.  

The Role of Organizational Design in 21st Century Organizations

Organizational design and the resulting capabilities are the last sustainable sources of competitive advantage that firms have available. Traditional sources of competitive advantage, such as products, technology, markets and production processes, are obsolete. This paper describes what is meant by organizational design and why it is so important today. It also describes that, with change occurring and occurring at an ever increasing rate, organizations that are very good at design have an enduring competitive advantage. Lastly, the paper describes self-managed work teams and how they create a flexible and reconfigurable organization, attributes of design that are critical today. 

Organizational Design

Organizational design is not simply about structure and the resulting organizational chart. It is not about balance sheets. It is about the relationships between people, work, formal structures and informal practices and behaviors. It is about the way in which an organization structures and coordinates its people and process so it can benefit from its unique capabilities over the long-term. According to Jay Gailbraith and his Star Model,[1] organizational design is foremost about strategy – the basic direction of the company and which activities are most necessary. It is also about the following:

1.   Structure – the placement of power and authority in the organization;

2.   Processes – how the organization functions and the flow of information;

3.   Rewards – aligning the goals of individuals to the goals of the organization; and

4.   People – building the organizational capabilities to execute the strategy.

In a fast-changing business environment, processes, rewards and people are more important than structure.

The Reason Organizational Design is Important

Organizational design determines who makes decisions and how those decisions will be made. It changes the role of the leaders as they become less decision makers and more decision shapers. Through organizational design, leaders become the shapers of the organization’s decision-making process.

As stated by Charles Handy in his book entitled, The Age of Unreason[2], the changes being experienced by organizations and individuals are different than that experienced in the past. They are discontinuous and not part of a pattern. Clever organizations do not work the way organizations used to work. They have different shapes, different working habits, different age profiles and different traditions of authority. The organization which treats people as assets, requiring maintenance, love, and investment, can behave quite differently than the organization that looks at people as costs, to be reduced wherever and whenever possible. Those who are always learning can ride the wave of change and see a changing world as full of opportunity. As a result, an organization’s ability to adjust itself to the changing environment is critical. Those that are very good at changing find a competitive advantage. In fact, David Nadler and Michael Tushman[3] assert that the only real sustainable source of competitive advantage left in our volatile environment is in the organizational architecture – the way in which an organization structures and coordinates its people and process in order to maximize its unique capabilities over the long-term.

Organizational Design as a Competitive Advantage

As just stated, organizational design and the resulting capabilities are the last sustainable sources of competitive advantage. The organizational architecture provides the framework for developing organizational capabilities. At every level, design is one of the most powerful tools for shaping performance. The best designs draw on knowledge, experience and expertise of people throughout the organization. The role of leaders is to manage, develop and grow organizational capabilities. The true test of leaders lies in their ability to envision, articulate, and launch radical change in the absence of immediate threat. The time to make changes is before they are needed. As a result, successful organizations create flexible architecture that can accommodate constant change. Flexible architectures and designs that leverage competitive strengths will become the ultimate competitive advantage.

One type of flexible architecture is the reconfigurable organization. As described by Jay Galbraith in his book entitled, Designing Organizations, the reconfigurable organization has structures and processes that are easily reconfigured and aligned with a constantly changing strategy (strategy must change in anticipation of the changing environment). A reconfigurable organization results from the use of three capabilities:

Teams and networks that cross organizational departments;

Use of internal prices, markets and market-like devices to coordinate the activity of multiple teams; and

Forming partnerships for the capabilities the organization does not have.

The structure of such an organization consists of a stable part and a changing part. The stable part is the functional part – the basic structure. Additionally, another stable part is the set of common businesses processes – new product development, customer relations, performance management, etc. The changing part is done through teams that focus on what is needed – products, market segments, channels or customers – the places of opportunity. This part changes with the changing strategy. These are the lateral processes that overcome the barriers present in a functional organization. As stated by Jay Galbraith, “[t]he stable structure is usually the functional and/or geographical home for nurturing talent. The reconfigurable part is the talent that is selectively moved into cross-company teams serving an ever-changing portfolio of opportunities. This type of company will organize around any dimension that represents an opportunity and for which the company has the expertise to create value for the customer.” 

The reconfigurable organization needs accounting systems and planning processes that allow it to operate as many small units. All the data must be available to all the parties. Costs and revenues must be assignable to products, segments, channels, etc. so that profitability can be determined. It is important that transfer prices reflect the market, in order to best coordinate resources amongst the small business units. As Jay Galbraith states, “[f]lexible, reconfigurable organizations must be aligned with flexible, reconfigurable accounting systems.”

Leadership of reconfigurable organizations must by skilled at resolving conflicts, as there will be many in this type of organization. Such conflicts are not bad, but must be worked through effectively to resolution. They will occur as the individual business units need help in determining what is best for the larger organization. The task of the management team is to integrate these smaller units by setting priorities and allocating resources, thus resolving conflicts.

A reconfigurable organization’s human resource policies must be aligned to incent the behaviors and develop the mind-sets that support reconfigurability. People need to be cross-functionally skilled, have cross-unit interpersonal networks and identify with the company as a whole. The organization must hire those who fit, as flexible organizations need flexible people. As Jim Collins says, the organization must get the right people on the bus and the wrong people off the bus.[4] Though jobs will change and new skills will be needed, values and culture are less likely to change. Therefore, the organization needs people who fit the values and culture. Again, as artfully stated by Jay Galbraith, “[f]or the reconfigurable organization, fondness for working in teams, ability to solve problems and handle conflicts, and the desire and potential to learn skills are some of the personality attributes that are sought.”

The rewards system must be flexible and reconfigurable to adjust to changing needs. There should be fewer pay grades than traditional reward systems. Salaries need to be based upon a person’s skills and contribution and not job title. The more people learn, the more they should earn. People will get fewer raises and more one time bonuses that reflect the successes of the small business units. People will be evaluated using a team-based appraisal approach – a 360 degree feedback model.

Self-Managed Work Teams Help Build the Reconfigurable Organization

As stated above, one attribute needed for an organization to be flexible and reconfigurable is the use of teams. There has been much success with the creation of high performance work structures (called self-managed teams). They are founded on the belief that most people want to produce quality products, and that there is enormous potential in the ability of teams to work together in collaboration. They are founded on five principles:

Minimal rules – only those essential to success;

Variance control – deviations from required work measured and corrected where they take place;

Multi-skills – each person skilled in several functions to provide variety and flexibility;

Boundary location – interdependent roles grouped within common structural boundaries; and

Information flow – channel information to where people are working and solving problems.

Self-managed work teams have a team agenda. The teams are goal focused and each member knows how they contribute to the team’s success, how they contribute to the success of other team members and how the team contributes to the success of the organization. They enjoy greater autonomy and discretion than regular work teams, and this translates into higher productivity and more effective results. They outperform traditionally supervised groups. The benefits of self-managed work teams are:

Better decisions because there are multiple sources of input and feedback, and the decisions are made closer to the issue and by people who have the greatest knowledge and ability to take effective action;

People in the organization feel accountable and responsible for the success of the enterprise;

There is buy-in on decisions made by the team;
People are better able to adjust to the rapidly changing competitive and global environment;

Cross training and building organizational depth is easier;
People are more flexible and respond faster to customers;
There is more opportunity for diversity in work and leadership roles for team members;
People are better suited for continuous improvement; and
Peer feedback provides more opportunity for growth.

 With self-managed work teams, the manager is a coach, sharing knowledge, encouraging and motivating the teams and individuals, guiding without taking over and helping remove barriers to the team’s success.  The manager leads by example, encourages risk taking, recognizes accomplishments and good attempts, recognizes and values differences and creates a culture of trust, credibility and respect.  The manager remains accountable for the team’s success, so the manager must have proper controls in place and trust that the team can do the job. The manager can be longer-term, strategically focused as the team carries on day-to-day activities with little need for the manager’s intervention.  Over time, the team members become independent, they undertake constructive self-change and become more flexible and adaptive while the team experiences peak performance.  Over time, the manager empowers the team by giving the team authority based upon the manager’s knowledge that the team is capable of taking on new assignments and the manager’s trust that the team will complete the assignments. Though self-managed work teams have high development costs, they pay high dividends if an organization is willing to make the investment. 

Conclusion

Organizational design is the only remaining source of competitive advantage. Since the environment is ever changing at an increasing rate, organizational design is a never ending process. As such, it is an essential and ongoing part of a leader’s job. Through organizational design, leaders become decision shapers. Good organizational design is one that lasts long enough to get you to the next. In order for this to happen, our organizations need to be reconfigurable. One way for an organization to be flexible and reconfigurable is through the use of self-managed work teams. 

About the author:

Paul Dumais is Director of Asset Management and Investment Planning at Iberdrola USA, a family of electric and gas utilities serving customers in New England and in the State of New York. He is second year student in the Doctorate of Strategic Leadership Program in the School of Global Leadership and Entrepreneurship at Regent University.  Mr. Dumais holds an MBA from the University of Southern Maine. He lives with his wife Kathleen in Webster, New York and may be reached for comment at paul.dumais@iberdrolausa.com

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